South Canterbury Finance's (SCF) collapse has cost the country $808 million, with a Treasury representative admitting it knew the company was troubled but let it join a guarantee scheme anyway.

Former SCF chief executive Lachie McLeod, and former directors Edward Sullivan and Robert White, are on trial before Justice Paul Heath in the High Court in Timaru. They face a combined 18 charges laid by the Serious Fraud Office.

SCF collapsed in August 2010, with taxpayers' money paid to investors under the Government retail deposit guarantee scheme.

Treasury manager of guarantee schemes John Park was on the stand today, discussing Treasury's awareness of the flagging finance company's troubles.

After the receivership the amount outstanding to taxpayers was just under $810m, he said.

Treasury had relied on information provided by SCF when allowing it to enter the scheme. Had Treasury been aware of related-party lending there would have been more investigation, Park said.

"If SCF was not in the scheme investors' money would have gone to other finance companies," Park said.

"If there was a delay [allowing SCF into the scheme] it would have put the particularly large entity under pressure."

A memo from Treasury showed public confidence was a key concern.

"It is a very significant company and it is clear it would have a very significant effect on public confidence in financial institutions in New Zealand and the confidence of depositors generally and it is necessary or expedient to grant a guarantee," the memo said.

SCF was at the time working on a merger which would inject $130m of equity into the cash-strapped company. It was also working on recapitalisation deals.

SCF was then allowed into the extended guarantee scheme.

"One of the reasons for the entry was the concern at the time if SCF was not approved for the extended scheme they would have come under major liquidity issues with people leaving and the company failing and losing the opportunity to realise recapitalisation deals in the interim and our loss would be crystallised," Park said.

"We didn't hold out great hope for the recapitalisation but otherwise it [SCF] was going to fail and fail quickly."

Justice Heath asked Park if there was sense that Treasury had had no choice.

"SCF went into the scheme and the run on in the best chance of ensuring our original liability was minimised," Park said.

"The company was engaging in extraordinary practices. It was selling off the front end of loans and subordinating its positions. It was working hard to stay solvent."